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Schooling and Labor Market Impacts of a Natural Policy Experiment

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  • Harry Patrinos
  • Chris Sakellariou

Abstract

We use a nationally representative household survey to estimate returns to schooling in Venezuela from instrumental variables based on a supply-side intervention in the education market. These estimates apply to a subgroup of individuals, in the spirit of the local average treatment effect (LATE) literature. Returns to schooling estimates that apply to a subgroup of individuals affected by the policy intervention may be more interesting from a policy perspective than the return to the 'average' individual. We use an instrument based on the 1980 education reform (the Organic Law of Education), which provided for 9 years of compulsory basic education. Alternative estimates derived from interacting the education reform with father's education are also obtained. The estimates are consistent with recent findings suggesting that the effect of education, at least for certain subgroups affected by policy intervention, is as large as or larger than what is suggested by ordinary least squares estimates. Copyright 2005 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by CEIS in its journal LABOUR.

Volume (Year): 19 (2005)
Issue (Month): 4 (December)
Pages: 705-719

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Handle: RePEc:bla:labour:v:19:y:2005:i:4:p:705-719

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References

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  1. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects and Econometric Policy Evaluation," NBER Working Papers 11259, National Bureau of Economic Research, Inc.
  2. Angrist, J.D. & Imbens, G.W., 1992. "Average causal response with variable treatment intensity," Discussion Paper 1992-34, Tilburg University, Center for Economic Research.
  3. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  4. James J. Heckman & Edward J. Vytlacil, 2000. "Local Instrumental Variables," NBER Technical Working Papers 0252, National Bureau of Economic Research, Inc.
  5. Esther Duflo, 2001. "Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment," American Economic Review, American Economic Association, vol. 91(4), pages 795-813, September.
  6. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
  7. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," United Kingdom Stata Users' Group Meetings 2003 02, Stata Users Group.
  8. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  9. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2003. "Evaluating the impact of education on earnings in the UK: Models, methods and results from the NCDS," IFS Working Papers W03/20, Institute for Fiscal Studies.
  10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  11. Maluccio, John A., 1998. "Endogeneity of schooling in the wage function," FCND discussion papers 54, International Food Policy Research Institute (IFPRI).
  12. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  13. Edward Vytlacil, 2002. "Independence, Monotonicity, and Latent Index Models: An Equivalence Result," Econometrica, Econometric Society, vol. 70(1), pages 331-341, January.
  14. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  15. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
  16. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
  17. Thomas J. Kane & Cecilia Elena Rouse & Douglas Staiger, 1999. "Estimating Returns to Schooling When Schooling is Misreported," NBER Working Papers 7235, National Bureau of Economic Research, Inc.
  18. repec:fth:prinin:455 is not listed on IDEAS
  19. James Heckman, 1997. "Instrumental Variables: A Study of Implicit Behavioral Assumptions Used in Making Program Evaluations," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 441-462.
  20. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
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Citations

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Cited by:
  1. Orazem, Peter & Glewwe, Paul & Patrinos, Harry, 2007. "The Benefits and Costs of Alternative Strategies to Improve Educational Outcomes," Staff General Research Papers 12853, Iowa State University, Department of Economics.
  2. World Bank, 2005. "Mexico : Determinants of Learning Policy Note," World Bank Other Operational Studies 8284, The World Bank.
  3. Chuang, Yih-chyi & Lai, Wei-wen, 2010. "Heterogeneity, comparative advantage, and return to education: The case of Taiwan," Economics of Education Review, Elsevier, vol. 29(5), pages 804-812, October.
  4. Patrinos, Harry Anthony, 2008. "Quality of schooling, returns to schooling and the 1981 vouchers reform in Chile," Policy Research Working Paper Series 4617, The World Bank.
  5. Ismail, Ramlee, 2007. "The Impact of Schooling Reform on Returns to Education in Malaysia," MPRA Paper 15021, University Library of Munich, Germany, revised 29 Jan 2008.
  6. Marito Garcia & Jean Fares, 2008. "Youth in Africa's Labor Market," World Bank Publications, The World Bank, number 6578, October.

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